True/False and Explain Gross Domestic Product 11. The market value of all the goods and services produced within a country in a given time period are included in GDP. 12. Wages paid to households for their labor is part of aggregate income. 13. Transfer payments are included in the government expenditures component of aggregate expenditure. 14. Aggregate income equals aggregate expenditure. 15. Capital is a stock; investment is a flow. 16. Gross domestic product is larger than net domestic product. Measuring U.S. GDP 17. GDP can be measured only one way. 18. The expenditure approach to measuring GDP adds firms expenditures on wages, rent, interest, and profit. Real GDP and the Price Level 19. The chainweighted output index method is how real GDP is calculated. 10. The GDP deflator is calculated as real GDP divided by nominal GDP, multiplied by 100. 11. If prices rise, nominal GDP is smaller than real GDP. The Uses and Limitations of Real GDP 12. If two nations have the same GDP, economic welfare must be the same in each. 13. Real GDP is a good measure of economic welfare in less developed nations, but is a bad measure in developed nations. 14. Real GDP is a good measure of the phase of the business cycle.
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